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Equipment diversion: smoking gun or anti-China plot?

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A state-run chinese company is denying it violated US export laws by diverting aircraft equipment purchased from McDonnell Douglas Corp. to a People's Liberation Army (PLA) missile plant.

Both China National Aero-Technology Import-Export Corp. (CATIC) and the Chinese government claim that an indictment issued last week in Washington is part of a wider campaign to fan the flames of China-bashing in the US.

A federal grand jury approved a 16-count charge that McDonnell Douglas, which has been taken over by Boeing, and CATIC conspired to skirt US laws that prohibit the transfer of technology to military end-users in China.

The US Justice Department and Customs say that CATIC signed a contract stating that the American equipment would be used to make civilian aircraft, but secretly sent the cargo to a factory in east China that manufactures Silkworm rockets.

The accusation is just the latest in a string of charges that China has engaged in espionage and other activities to illegally acquire everything from American nuclear-weapons secrets to rocket technology and supercomputers in order to close its defense gap with the US.

A manager at the Nanchang Aircraft Manufacturing Co., in Jiangxi province in east China, conceded in an interview by telephone that the McDonnell Douglas machinery had been delivered to his plant.

"Because the United States objected to the transfer, the equipment was immediately sent to a civilian airplane company in Shanghai," said the manager, who declined to identify himself.

The executive said that the plant did not use the machinery, and added that Nanchang Aircraft "has never manufactured missiles or any other weapons."

But a Western military analyst says there is no question but that Nanchang is a PLA-run arms factory.

"It is common knowledge in defense circles that the Nanchang factory makes Silkworm missiles, fighter aircraft, and other weapons," says the analyst, who asked not to be identified.

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